Human or Scalable… What’s Better For Business Growth?Monday July 14th, 2014
Is building for scale the only way to grow a business? Some businesses should focus on the customer and not get fixated on scaling right away.
I recently attended a strategy meeting with a client and some of her advisors. We were discussing the future of her business and each advisor took a turn providing their two cents.
The term “scalability” came up several times.
My Definition of Scalability: A business’s ability to increase profit exponentially by expanding output without adding resources and expenses
We kept coming back to it, as if there was only one avenue to business growth: create a scalable technology or you’re headed for a dead end.
I walked away from the meeting feeling slightly frustrated, not because I hate scalability, but because of how much attention it drew at the meeting and how much it was throwing the conversation off track. It felt wrong.
I took the weekend to think about the meeting. I started questioning… is building for scale the only way? Can you grow a successful business that isn’t considered scalable by VCs and angels? What about pushing the human aspect of a business if it’s working?
Shouldn’t we stop talking about scaling and start bringing in revenue!?!
The truth was, I was concerned.
I had been working with this particular client for more than a year now, and I knew her goals and aspirations well. I also knew her talents. She was amazing at connecting with her customer, handling an audience and she was achieving some great results. These human qualities made her special. Her current business model was working, albeit unrefined and perhaps not scalable, at least in the tech-startup sense of the word. She was making money, and her customers loved her.
Focusing on scalability would hold her back. It would send her business in a new direction that would be foreign to her, without any real proof of concept. She would need to invest hundreds of thousands to develop a technology platform that focused on a secondary facet of her business, not her bread and butter.
I could tell she was a bit derailed from the meeting. She was suddenly worried about building a technology platform and being scalable. She emailed me wondering what to do next.
I remembered back to a great article I read years ago written by Paul Graham: Do Things That Don’t Scale. It points out that many of the hottest startups in the recent few years engineered early growth by doing things that weren’t scalable. I went back and skimmed the article to refresh my memory.
Ah yes, I was feeling much better. You can build a business without being scalable after all, at least not at first. This can be applied to tech startups and more traditional businesses, too.
I sent the article along to my client, and reminded her that she has plenty of potential with her current business model and shouldn’t be sidetracked by scalability. At least not right now.
So that’s my client, but every business is different. A scalable business may be the goal for one entrepreneur and not the next, and that’s okay, but how do you know what’s right for you? What’s your best path to business growth?
Should Scalability Matter To You?
It depends on your goals and why you’re in business in the first place. If your immediate goal is any of the following, scalability is probably important.
- Increase valuation quickly
- Attract the attention of venture capitalists
- Build a business to exit
- Accelerate business growth
Applying A Popular Methodology
The tech startup world cares a great deal about scalability. They also talk a lot about being lean and building an MVP first. The popular Lean Startup methodology taught by Eric Ries can be applied to businesses that don’t scale.
You don’t have to code something to be lean. You can be lean and have an iterative, customer-centric approach, all while doing things that don’t scale. You can grow your business this way, too.
Your true MVP may just be something that doesn’t scale and isn’t built with code.
That was the case for my client. She was already embodying her MVP. Customers were paying for her expertise and demand for her product was growing faster than supply.
By doing what she does well, she was being forced to scale her production in a organic way instead of getting stuck on the idea of scaling before proof of concept.
Make Money First, Scale Later.
I believe it’s more important to find a true need in the marketplace and a unique way to fulfill that need. If you are worried about scaling before making money, your focus is wrong. You should be out in the world mingling with your customers. Find out what they respond to and what they are willing to pay. Test your hypothesis, get feedback, ask questions, expand.
If your business has a human element, and the human element is one of your biggest assets, develop it. Let it flourish. Please don’t shove it aside because people keep asking you if your business is scalable. Worry about that later. Or don’t worry about it at all. Depends on where you want to take your business.
In the end, it’s about growing your business to suit the needs of your customers, while satisfying your personal goals. If it’s the human element that makes you special and your customers love your product, keep refining and keep going. Don’t let anyone break your stride.